11 May 2012

£200,000 to create one job under government scheme

The coalition’s flagship regional growth fund is spending up to £200,000 to create just one job, according to a new report by auditors.

Deputy Prime Minister Nick Clegg (Getty)

The regional growth fund was launched nearly two years ago to support enterprise and promote business in areas that have traditionally been reliant on the state. It was praised by David Cameron and Nick Clegg earlier this week when they visited one of its beneficiaries in Essex.

The report by the National Audit Office has found that the scheme is not performing any better than similar initiatives under Labour.

“If the fund delivers in line with expectations, the average cost to the fund of each net additional job would be £33,000,” they said.

This does not mean that the regional growth fund is a failure. Economist Dr Neil Lee

Dr Neil Lee, senior economist at the think-tank The Work Foundation told Channel 4 News: “The regional growth fund’s performance has been similar to previous job creation efforts, such as the regional development agencies (RDAs).

“This will come as a surprise to few people except politicians. Creating new jobs is hard, particularly in the current economic climate. There is no magic bullet for economic growth.

“This does not mean that the regional growth fund is a failure – any jobs which can be created are welcome. But it does call into question the government’s decision to scrap the RDAs at great cost, only to replace them with the smaller regional growth fund with no significant improvement in performance.”

‘Staggering’ incompetence

Opposition politicians said they were shocked by the way the fund has been administered.

“The scale of incompetence and confusion in the implementation of the (regional growth fund) is simply staggering,” Chuka Umunna MP, Labour’s Shadow Business Secretary, said in a statement. “It is astonishing that no administrative resources were allocated to it and that specialists were not used to evaluate bids.”

“While Nick Clegg said the fund would lead to half a million jobs, the report forecasts that it will create only up to 41,000 jobs, and many of them would have been created in any event,” he added.

Better value

The National Audit Office‘s report suggested that the taxpayer would have received much better value for money if bids had been more closely scrutinised.

“Over 90 per cent of the net additional jobs could have been delivered for 75 per cent of the cost, with the cost of each job then being £26,000.

“The cost per net additional job supported by the fund varies from under £4,000 to over £200,000,” it said.

The government says it has already acted on some of the NAO’s findings and Business Secretary Vince Cable maintained the programme is beneficial: “The NAO’s report recognises that the Regional Growth Fund is working.

“It shows that the RGF is set to create and protect 328,000 jobs for people in communities that need the most support and help companies grow. It shows that our processes are robust, competitive and unbiased. It shows that we chose to support the highest quality bids offering best value for money.

“We have already put in place some of the NAO’s recommendations such as making more administrative resources available, which means projects are being processed even faster. Round three will create thousands more jobs, and businesses have until June 13 to submit their bids.”